Correlation Between Sunworks and FTC Solar

Can any of the company-specific risk be diversified away by investing in both Sunworks and FTC Solar at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sunworks and FTC Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunworks and FTC Solar, you can compare the effects of market volatilities on Sunworks and FTC Solar and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sunworks with a short position of FTC Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunworks and FTC Solar.

Diversification Opportunities for Sunworks and FTC Solar

0.04

Correlation Coefficient

Sunworks  FTC Solar

Significant diversification

The 3 months correlation between Sunworks and FTC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sunworks and FTC Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTC Solar and Sunworks is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sunworks are associated (or correlated) with FTC Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTC Solar has no effect on the direction of Sunworks i.e., Sunworks and FTC Solar go up and down completely randomly.

Pair Corralation between Sunworks and FTC Solar

If you would invest  162.00  in Sunworks on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Sunworks or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Sunworks  vs.  FTC Solar

Sunworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunworks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sunworks is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FTC Solar

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FTC Solar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, FTC Solar demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunworks and FTC Solar

The main advantage of trading using opposite Sunworks and FTC Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunworks position performs unexpectedly, FTC Solar can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FTC Solar will offset losses from the drop in FTC Solar's long position.

The idea behind Sunworks and FTC Solar pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.